WASHINGTON, D.C. – Senator Barbara A. Mikulski (D-MD), as the Ranking Democratic Member, took part in today's Appropriations Subcommittee hearing of the Veterans, Housing, and Independent Agencies (VA-HUD) to discuss the FY04 budget for the Corporation for National and Community Service and the Community Development Financial Institutions (CDFI) Fund. Corporation for National and Community Service Chief Executive Officer Leslie Lenkowsky and CDFI Director Tony Brown testified at today's hearing.

Senator Mikulski's Opening Statement for Corporation for National and Community Service

Welcome Dr. Lenkowsky and Russell George, who is testifying for the first time as the Corporation's Inspector General. As the Godmother of national service, I have fought to uphold the original principles that our national service programs were founded upon.

These principles are: to provide qualitative and quantifiable service to communities while we create "habits of the heart", and reduce student loan debt. The idea behind National Service was to link our values to public policy. And to provide young Americans with an opportunity to serve their communities while helping to pay for college.

I supported these principles even when they were not popular while being mindful of the need for responsible stewardship and of taxpayer dollars. I support the President's call to service. But I cannot support a bureaucracy that breaks the law, mismanages taxpayer dollars, and creates uncertainty for our communities and our volunteers. The Corporation for National Service needs to get its house in order, or it will be unable to take national service into the new century equipped to meet new challenges.

Priorities

I am pleased that the President embraced national service, and I want to work with him in a bipartisan way to take national service into the next century. But I am really concerned that management problems call into question the Corporation's ability to grow while standing sentry over taxpayer dollars.

So my goals for this budget hearing are two-fold: First, I hope the Corporation can restore the confidence of our communities, non-profits, and graduates of national service programs. The VA-HUD Subcommittee is on their side; promises made must be promises kept, both to volunteers and to communities. Second, I hope the Corporation can begin to restore the Subcommittee's confidence that appropriate steps are being taken to prevent mismanagement and uncertainty.

Over-Enrollment of Volunteers

I was deeply troubled when the Corporation revealed that its standard operating procedure was to enroll more volunteers than the Corporation had funds to support. Last year, the Corporation budgeted for 50,000 volunteers, but it enrolled over 70,000. This created a critical shortfall in the National Service Trust which pays for volunteers' education awards.

The Corporation broke the law. The law requires for every volunteer enrolled, there must be a deposit into the Trust to pay for that volunteer's education award. This concept is simple, straightforward, and is spelled out in the Corporation's statute.

The Corporation's mismanagement of the AmeriCorps program has jeopardized the very principles upon which National Service was founded to provide young Americans with opportunities to serve their communities while helping to pay for college.

The Corporation had to "freeze" volunteer enrollments. This created uncertainty for volunteers, who were waiting for assignments; for communities, who were ready to put the volunteers to work; and for graduates of the Corporation's programs, who were concerned about the status of their education awards. This happened at a time when the public's interest in volunteering is very high, and many organizations have experienced a large increase in applications.

The consequences of the Corporation's mismanagement were grave. When the House and Senate met to conference for 2003, the House had $0 for National Service, and the White House did not weigh-in that National Service was a priority.

We struggled to just level-fund National Service, but we had to increase the Trust to $100 million, to fix the Corporation's mistakes. This meant that there is about 30 percent less funding for programs in 2003. I was very disappointed that we could not support the President's call to service. I was especially puzzled when public statements by Corporations officials seemed to blame Congress for the "freeze" because the government was operating under a Continuing Resolution.

For the record, I want to be perfectly clear: the VA-HUD Subcommittee has always provided all the resources that the Corporation has requested for education awards. I want to acknowledge Congress had rescinded funds from the Trust in the past. These rescissions were taken with the Corporation's advice and assurance that the Trust would be able to fulfill all education awards.

So the Subcommittee has relied on the Corporation, the Board, the IG, and OMB to be the accountants for the Trust. Unfortunately, the accountants failed the Subcommittee, failed our communities, and failed our volunteers.

OMB's Accounting Rules for the Trust

To make matters more complicated, OMB recently decided to change the rules of the game for the Trust. The Corporation has always been able to count both appropriations and interest when calculating Trust funding.

Now, OMB says that the Corporation can no longer count interest earnings in future budgeting for the Trust. So VA-HUD has included $64 million for the Trust in the Supplemental—this is the amount that the President requested. Moving forward, I want to know what steps the Corporation is taking to ensure that budgeting for AmeriCorps programs, and education awards is accurate. I also want to know what the Board and the IG will do to ensure proper oversight of the Corporation.

Budget Overview

The 2004 budget request is $598 million for all National Service programs under the VA-HUD Subcommittee's jurisdiction. This is $167 million above 2003 – a 40 percent increase. This is in addition to $365 million requested under the Labor-HHS Subcommittee. For a grand total request of almost $1 billion for National Service in 2004. The budget requests a $140 million increase for the AmeriCorps program to increase the number of volunteers from 50,000 to 75,000.

Again, I want to support the President's call to service. But I really question whether the Corporation can grow until we are sure that its financial house is in order.

Other areas of the budget are status quo. There is a small $2 million increase for the National Civilian Conservation Corps to open a new "satellite campus" this year, and the Learn and Serve program remains level-funded at $43 million.

Earmarks and Challenge Grants

The budget request includes three earmarks. Two of the earmarks are authorized and were funded last year: $10 million for Points of Light, and $7.5 million for America's Promise. There is a new earmark in the budget: $3 million for Teach for America. These are good organizations that are worthy of our support.

But I am disappointed that the budget does not fund Challenge Grants. Last year, Challenge Grants were our "policy solution" to earmarks. VA-HUD funded Challenge Grants for the first time. Grants will go to nationally recognized organizations that raise private funding. Grants require a 2 to 1 match.

Last year, VA-HUD received almost $40 million in earmark requests from groups that deserve our support. But we couldn't fund them all, and we didn't want to pick winners and losers. I would like to know why the budget eliminates Challenge Grants. I would like to see Challenge Grants continued as a policy solution to earmarks.

Conclusion

Volunteerism is our nation's trademark; it highlights what is best about America. Volunteer programs are the backbone of our communities. They help preserve the safety net for seniors, keep our communities clean, and get our kids ready to learn. This is an important time in the history of national service. National service is at a crossroads, and so is our nation. So I hope the VA-HUD Subcommittee can count on the Corporation to get its house in order so we can take national service into the new century, equipped to meet new challenges.

Senator Mikulski's Opening Statement for CDFI Hearing

Welcome Director Brown. This is the second time Mr. Brown has testified before this subcommittee. Unfortunately, each time we see you, the CDFI Fund request gets lower.

Budget Cut

For fiscal year 2004, the Administration requests $51 million for the CDFI Fund. This is a 30% cut from the fiscal year 2003 enacted level. And it would put the CDFI Fund back at its 1997 level.

When I look at the CDFI budget request, I do not see a CDFI Fund request, or a Tony Brown request; I see an OMB request. The CDFI Fund has a very important mission. It invests in organizations that are dedicated to improving low-income neighborhoods, and the lives of low-income people. When I look at the budget for the CDFI Fund, I do not evaluate numbers; it is not about numbers. The CDFI budget has to be about people. There is one increase in the 2004 budget request for CDFI – and it is for administration. Federal resources should support people, not bureaucracy.

There are 16 CDFIs in Maryland. They are very important to community development in my state. They provide loans for small business development, they fix up storefronts, and they build community centers. They also provide homeownership loans that are not predatory and fraudulent.

Fairbanks and Predatory Lending

On March 6, I asked the HUD IG to investigate a mortgage service agency called Fairbanks. I heard about Fairbanks sending fraudulent foreclosure letters to homeowners in Baltimore. I asked Sec. Martinez and the IG to conduct thorough criminal investigation, to share information with other federal agencies, and to act as clearinghouse for victims' calls.

We are waiting for a preliminary report from the HUD IG. What we know for sure is that people who are subprime borrowers are targets for predatory scams. CDFIs provide a safe haven for low-income borrowers. I am very concerned that cuts to the CDFI fund mean cuts to non-predatory loans.

I have been involved in the issue of predatory lending and flipping for a long time now. We have made some good progress in Baltimore, where flipping has gone down by 40%. In Baltimore one of our partners in the fight against flipping is the Baltimore Community Development Financing Corporation—they are a CDFI. The Baltimore Community Development Financing Corporation administers the Baltimore HELP program.

One of the things I did in Baltimore was to get $1 million of HUD money for the Baltimore HELP program. That program provides counseling on loans, and refinances predatory mortgages so that people don't go into default. We need more programs like the Baltimore HELP program—not fewer.

New Markets Tax Credits

The CDFI fund is shifting its focus away from the Fund to administering the New Markets Tax Credit. The Fund recently announced the first round of tax credits totaling $2.5 billion. 4 Maryland groups received awards totaling $161 million. I believe that the New Markets Tax credits are an important tool in community development. I am pleased that Maryland will benefit from them.

But I do not believe that New Markets Tax Credits are a substitute for the CDFI Fund. Administration of the tax credit program is very important—now is the time to start the data collection, and institute proper program oversight.

Conclusion

I want to hear from the CDFI Fund today about program oversight, and about how this proposed budget reduction will affect communities and people. I want to hear about people, not programs—about advocacy, not accounting. We look forward to your testimony.